• European equity markets began the new trading month mixed following a similar lead from the APAC session
• White House Chief of Staff Meadows suggested there is still a long way to go in coronavirus relief negotiations and that he is not optimistic of reaching a long-term deal
• Trump administrations is reportedly mulling options for unilateral actions to address some of the economic fallout from the pandemic if no stimulus deal is reached; sources
• Source reports stated that President Trump is to allow 45 days for ByteDance to negotiate the sale of TikTok to Microsoft
• The DXY was firmer above 93.500 level as, EUR/USD is sub 1.1800 and GBP/USD below 1.3050
• Looking ahead, highlights include, US Manufacturing PMIs (Final), US ISM Manufacturing PMI & Construction Spending, Fed’s Bullard & Evans
• Earnings: Marathon, McKesson, Tyson Foods

CORONAVIRUS UPDATE

US CDC reported coronavirus cases rose by 58,947 to 4.6mln and deaths rose by 1,132 to a total of over 154k, while a major newswire tally showed that US coronavirus cases rose by at least 45,688 to 4.68mln and deaths rose by at least 420 to 155,343. (Newswires)

A major incident was declared in Greater Manchester, UK due to a continued rise in coronavirus infections with substantial increases for Manchester, Oldham and Tameside. (Manchester Evening News)

Ireland’s Health Minister said they are considering additional measures to restrict non-essential travel. (Newswires)

Australia’s Victoria state declared a state of disaster with the state capital of Melbourne to be subjected to tougher restrictions including a curfew from 8pm-5am to at least September 13th. (Sky News) Thereafter, Australian PM announced that the government is to establish a pandemic leave disaster payment. (Newswires)

Philippines is to reimpose tougher coronavirus restrictions in and around the capital of Manila for 2 weeks from August 4th, while the health ministry reported 5,032 new coronavirus infections which was a record daily increase. (Newswires) Hong Kong reports 80 (Prev. on Friday was 121) new cases of COVID-19. (Newswires)

ASIA

Asian equity markets began the new trading month mixed after last Friday’s positive close on Wall St where the tech sector rallied following earnings from the industry giants including Apple which rose to a fresh record high, but with upside in the region restricted ahead of this week’s risk events and after continued stalemate in US coronavirus relief discussions. ASX 200 (flat) was subdued as gains in commodity related sectors were offset by underperformance in the top weighted financials and with trade hampered by reduced liquidity due to bank holiday in New South Wales, while risk appetite was also weighed by a state of disaster declaration in Victoria with the state capital of Melbourne to be subjected to tougher restrictions including a curfew through to at least September 13th. Nikkei 225 (+2.2%) was the stellar performer as it coat-tailed on recent favourable currency flows and after Q1 Final GDP topped estimates, although there were some notable losses seen in Shinsei Bank and Mazda post earnings, as well as Seven & I on news it is to acquire Speedway convenience stores from Marathon Petroleum in a deal valued around USD 18.9bln. Hang Seng (-0.6%) and Shanghai Comp. (+1.8%) were mixed after PBoC inaction resulted to a CNY 100bln liquidity drain and as participants digested a more than 50% drop in HSBC HY profits, as well as the highest Chinese Caixin Manufacturing PMI reading since 2011. There was also plenty of focus around tech after reports that President Trump is to allow 45 days for ByteDance to negotiate the sale of TikTok to Microsoft and will reportedly take action on Chinese software companies that threaten national security in the approaching days. Finally, 10yr JGBs were lower amid a surge in Japanese stocks and with the BoJ present in the market for JPY 450bln of JGBs predominantly focused on 1yr-3yr maturities, while the central bank recently announced its buying intentions for August in which it maintained the current pace of purchases for all maturities.

PBoC skipped reverse repo operations for a net daily drain of CNY 100bln. (Newswires) PBoC set USD/CNY mid-point at 6.9980 vs. Exp. 6.9984 (Prev. 6.9848)

Chinese Caixin Manufacturing PMI (Jul) 52.8 vs. Exp. 51.3 (Prev. 51.2); Highest since January 2011. (Newswires)

China's ByteDance was said to have agreed to divest the US operations of TikTok entirely and source reports later stated that President Trump is to allow 45 days for ByteDance to negotiate the sale of TikTok to Microsoft (MSFT). (Newswires)

China's MOFCOM has launched an anti-dumping investigation into polyphenylene ether imports from the US from today. (Newswires)

US Secretary of State Pompeo said that President Trump will take action on Chinese software companies that threaten national security in the approaching days. (Fox News)

Japanese GDP (Q1 F) Q/Q -0.6% vs, Exp. -0.7% (Prev. -0.6%). (Newswires) Japanese GDP (Q1 F) Y/Y -2.2% vs. Exp. -2.8% (Prev. -2.2%)

US

White House Chief of Staff Meadows said there is still a long way to go in coronavirus relief negotiations and that discussions on Saturday were a step in the right direction, although he is not optimistic of reaching a long-term deal, while US Treasury Secretary Mnuchin commented that the White House agrees enhanced unemployment is necessary but does not want to overpay people and suggested they have to be careful not to pile on enormous debt for future generations. (Newswires/CBS)

US House Speaker Pelosi commented that US President Trump is standing in the way of enhanced unemployment benefits and that unemployed Americans need USD 600 extra per week in unemployment aid during the pandemic, while she also stated that she does not have confidence in coronavirus task force coordinator Dr. Birx. (Newswires)

Trump administrations is reportedly mulling options for unilateral actions to address some of the economic fallout from the pandemic if no stimulus deal is reached, according to sources cited by Washington Post. Lapsed enhanced unemployment benefits or the expired moratorium on evictions are two matters President Trump has identified as priorities. (Washington Post)

Fed’s Kashkari (voter, dove) said a high level of US personal savings means Congress can support those who are hurting the most and that Congress should use this opportunity to support the American people, while he also stated that the high US debt level is not an issue because US does not fund deficit by overseas borrowing. (Newswires)

Fitch affirmed US at AAA; revised outlook to Negative from Stable. (Newswires)

UK/EU

UK PM Johnson is said to have instructed officials to draw up nuclear plans to avert another nationwide lockdown, which is expected to involve asking millions of more people over the age of 50 to stay at home if local crackdowns are unsuccessful in curbing a 2nd wave of the outbreak. The report also noted that measures could also include the sealing off of London from the rest of the country. (The Sunday Times)

UK Trade Secretary Truss will be meeting with US officials this week, where she is expected to raise retaliatory tariffs as part of the Airbus (AIR FP) and Boeing (BA) dispute alongside the prospect of further tariffs being levied on UK goods. Sources stated that the UK Trade Secretary is expected to meet with USTR Lighthizer on Monday and Tuesday. (FT)

UK Markit/CIPS Manufacturing PMI Final (Jul) 53.3 vs. Exp. 53.6 (Prev. 53.6)

EU Markit Manufacturing Final PMI (Jul) 51.8 vs. Exp. 51.1 (Prev. 51.1)

German Markit/BME Manufacturing PMI (Jul) 51.0 vs. Exp. 50.0 (Prev. 50.0)

French Markit Manufacturing PMI (Jul) 52.4 vs. Exp. 52.0 (Prev. 52.0)

Italian Markit/IHS Manufacturing PMI (Jul) 51.9 vs. Exp. 51.3 (Prev. 47.5)

Spanish Manufacturing PMI (Jul) 53.5 vs. Exp. 52.0 (Prev. 49.0)

EQUITIES

Mixed trade in the European equity sphere (Euro Stoxx 50 +0.6%) after a similar lead from APAC markets, as participants remain on standby for this week’s key risk events - including US ISM and labour market report alongside any updates on fiscal stimulus talks. Core EU bourses saw some upside in the run-up to the Final Manufacturing PMIs, potentially on optimism for higher revisions, but indices have since remained contained. UK’s FTSE 100 lags the core markets on currency dynamics, and with the Financial sector hit on the back of dismal earnings from HSBC (-5.1%) where Q2 profit slumped and loan loss provisions rose almost seven-fold. Furthermore, SocGen (-3.1%) adds to the woes in the sector after posting a surprise loss due to pandemic impact on equity trading. Energy names have also lost steam amid price action in the complex, but overall European sectors remain mixed with no clear risk tone to be derived. The sectoral breakdown sees Travel and Leisure at the bottom as second wave fears materialise in the sector. Elsewhere of note, AI company Shanghai Zhizhen Network Technology is suing Apple for around USD 1.4bln over virtual assistant patent violations, WSJ reported.

Apple (AAPL) - AI company Shanghai Zhizhen Network Technology is suing Apple for around USD 1.4bln over virtual assistant patent violations. (WSJ)

FX

CHF/AUD - Mixed macro impulses for the Franc as Swiss CPI was considerably firmer than forecast, but the manufacturing PMI fell short of expectations and the key 50.0 mark to leave Usd/Chf eyeing 0.9200 and Eur/Chf even closer to 1.0800 following yet another rise in weekly bank sight deposits. Moreover, the cross has rebounded amidst Eurozone manufacturing PMIs that beat consensus and underpinned EU stocks alongside economic recovery hopes. Conversely, the COVID-19 escalation in Melbourne, Victoria has prompted a state of disaster amidst tougher restrictions and a curfew in the capital until September 13, at the earliest, on the eve of the RBA policy meeting – full preview of the event available on the headline feed – to the detriment of the Aussie that is holding just above 0.7100 vs the Greenback compared to last Friday’s 0.7200+ new ytd peak.

USD - The Dollar has handed back some of its pre-month end gains after the DXY rebounded further from fresh 2020 lows (92.546) to 93.708 and is now pivoting 93.500, with additional support coming via M&A flows due to deals amounting to Usd 16.4 bn and Usd 21 bn for US companies from German and Japanese rivals respectively. Ahead, the final Markit manufacturing PMI, ISM equivalent and construction spending before a duo of Fed speakers (Bullard and Evans).

JPY/GBP/NZD - All intiailly firmer against the Buck, or off worst levels to be more precise, as the Yen regains composure following its aggressive reversal from the low 104.00 area to 106.40+, while Sterling revisited 1.3100 from not far off 1.3050 even though the final UK manufacturing PMI was revised down a tad and the coronavirus outbreak in Northern England has reached ‘major incident’ proportions in Greater Manchester. Elsewhere, the Kiwi is benefiting from the aforementioned Aussie travails to an extent given Aud/Nzd pulling back below 1.0750 to keep Nzd/Usd more buoyant on the 0.6600 handle despite reports that hedge funds are implementing bearish positions ahead of the RNBZ later in August.

EUR/CAD/SEK/NOK - Some traction for the Euro within 1.1796-42 parameters vs the Greenback in wake of the better than prelim/anticipated Eurozone manufacturing PMIs, but no confirmed breach of resistance in the form of the 100 HMA (1.1779), while the Loonie is sub-1.3400 amidst another downturn in crude prices that is also hampering the Norwegian Krona relative to its Swedish counterpart after the manufacturing PMI reclaimed 50.0+ status and retail sales picked up pace. Indeed, Eur/Nok is hovering around 10.7500 in contrast to Eur/Sek testing 10.3100 vs highs of 10.7860 and 10.3515 respectively.

EM - The Yuan is keeping its head above 7.0000 on the back of China’s Caixin manufacturing PMI exceeding forecast at 52.8 for the strongest print since January 2011 and the Rouble is consolidating off recent lows circa 74.0000 awaiting the latest CBR MPR, but the Rand is lagging near 17.3000 after a steep decline in SA tax receipts for the fy through end July.

FIXED INCOME

Core debt remains on the defensive after extending pull-backs from pre-month end peaks to 177.14, 138.27 and 139-30 for Bunds, Gilts and 10 year T-note futures respectively, but the UK benchmark has recently embarked on a firmer recovery mission with impetus derived from an unexpected tweak to the final manufacturing PMI vs upside surprises across the Eurozone. Moreover, renewed Sterling weakness looks constructive for Gilts that have been up to 138.49 vs 138.55 at the Liffe close on Friday, as Bunds remain closer to their Eurex base and Treasuries near 140-00 with the curve modestly steeper pre-Markit PMI, ISM manufacturing, construction spending, Fed’s Bullard and Evans.

COMMODITIES

WTI and Brent front-month futures remain subdued in early European trade with little by way of fresh fundamental catalysts, but with that being said, OPEC+ are poised to ease the magnitude of the agreed-upon cuts this month which will see an additional 1.9mln BPD of supply entering the market – this was reflected by the Russian oil and gas condensate output for the first half of August. It is also worth bearing in mind that the extra supply comes against the backdrop of rising second-wave fears which have prompted some cities to re-enter lockdown, whilst others deferred their reopening plans. Elsewhere, spot gold remains uneventful after testing support at USD 1970/oz (vs. fresh high 1987.94), with the yellow metal decoupled from Dollar dynamics (for now) as prices remain near record highs. Spot silver sees similar lacklustre action sub 24.50/oz. Turning to base metals, Dalian iron ore futures rose in excess of 4% to hit 12-month highs on a firm demand outlook. Conversely, copper touched a three-week low despite the strong Chinese factory data, with some citing second wave fears.

Russian oil and gas condensate output stood at 9.81mln BPD on August 1-2 (prev. 9.37mln BPD on average in July). (Newswires)

NHC says Tropical Storm Isaias is forecast to become a hurricane today; with warnings issued for a portion of the coast of South and North Carolina. (Newswires)